This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

"The keiretsu structure and the close relations prevailing between Japanese
industry and government minimize the risk of investment for Japanese
executives to a level far below that faced by their American counterparts."

Introduction

Keiretsu refers to the framework of relationships
among Japanese companies that was organized around a common bank for
their mutual benefit after the World War II.

The Keiretsu structures cooperated with and received strong support from
the Japanese government. In the late 1980s, Keiretsus contributed 17% of
the total sales and 18% of the total net profits of all Japanese
businesses. The Keiretsus employed five percent of Japan's work force.3
According to the Japan Fair Trade Commission, in 1992, almost 20% of
Japan's capital was held by the big six Keiretsus and their
subsidiaries.4

There were wide ranging business links between small and
medium-sized manufacturing firms in Japan and the Keiretsus, which meant that
the Keiretsu structure left its imprint at all levels of the Japanese economy.

The Keiretsu structure helped the companies
affiliated to a Keiretsu to maintain long-term business relationships
with their partners. The long-term relationship between different
companies helped each of them to share resources and increase their
competitiveness especially in the export market, which provided the
revenues that helped the Japanese economy to grow during the post-World
War II period.

The companies affiliated to a particular Keiretsu always had each
others' long term interests in mind when they undertook any activity,
and each of them derived great advantages through this relationship.
Each company owned equity in the other member companies of a Keiretsu.